My Retirement Portfolio's 30-Month Performance Update: Simple And Effective

| About: Altria Group, (MO)


This is my actual retirement portfolio scaled down to a $1M portfolio, initially presented on 7/24/2014 here on Seeking Alpha to demonstrate its performance and how I actively manage it.

My projected dividend income has increased from $48,205 to $49,115. This is a 1.9% increase of retirement income due to reinvestment of Altria's quarterly dividend, Roth contributions and bonus money.

My challenge is to resist the temptation to trade shares of MO. I intend to Hold MO and look forward to the annual dividend increase past history implies.

I am considering selling about 15% of my MO position and buying AGNC or EEQ at some point in the future to increase the dividend income. More deliberation is needed.


This article is an update of my public retirement portfolio. It is my actual retirement portfolio. It was initially presented on 7/24/2014. I scaled the portfolio down to $1M*. The initial portfolio consisted of three stocks. My most recent update can be found here.

My initial retirement portfolio published on 7/24/2014 is listed below.

I used the closing prices on 7/22/2014:

American Capital Agency (NASDAQ:AGNC) = 40.3% = $403,000 = 17,230 shares, price = $23.39 the current annual dividend = $2.60 = Income = $44,798

Altria Group (NYSE:MO) = 38.3% = $383,000 = 9,134 shares, price = $41.93 the current annual dividend = $1.92 = Income = $17,537

Prospect Capital (NASDAQ:PSEC) = 21.4% = $214,000 = 19,705 shares, price = $10.86 the current annual dividend = $1.325 = Income = $26,109

Total value of the portfolio = $1M Total Income = $88,444 = a yield of 8.8%

* = When I made my retirement portfolio public for the first time here on Seeking Alpha on 7/24/2014, it was worth more than a $1,000,000. For the sake of simplicity (easy to track % gains or losses from a starting point of $1M), I scaled it down to $1M.

What has happened since my last report of my retirement portfolio:

1) MO paid its quarterly dividend on 1/10/2017 and I reinvested all of it back into MO. Additionally, I contributed to my Roth IRA and my wife's Roth IRA the maximum amount on the first trading day of 2017 and bought more shares of MO. Lastly, I moved over $650K (not scaled down) from three different accounts (my Roth IRA, my SEP IRA and my wife's Roth IRA) to TD Ameritrade (NASDAQ:AMTD). Moving the money over to TD Ameritrade resulted in receiving bonus money in all three accounts. I used the bonus money to buy additional shares of MO. This increased my MO position from 19,756 shares to its current share count of 20,129 shares.

2) I successfully resisted the temptation to make any trades in my retirement accounts this past quarter (since my last article).

3) I converted my entire SEP IRA into my Roth IRA in 2017. 100% of my retirement savings are in Roth IRAs. 100% of the Roth IRAs hold MO.

4) On a personal note, I did buy more MO in my taxable account.

My Portfolio as of 10/24/2016, with a yield of 3.8%

My current Portfolio as of 1/11/2017, with a yield of 3.6%

Some Of My Thoughts Regarding Investing In Altria

I have 100% of my retirement portfolio invested in MO as of 6/2/2016. I am not recommending anyone else follow my investment decision to be in MO 100%. I do believe that MO is an excellent investment. Each investor should decide for themselves what % of their portfolio should be in MO. I also understand that some investors do not want to own MO based on their personal feelings, and that is fine with me, each to their own. We must all live with our decisions.

I have asked myself what is my strategy for my MO investment! I have decided that I will HOLD my MO shares in my retirement accounts at this point in time. I was tempted to sell about 1/2 of my MO position when it hit $70 and then buy it back at a cheaper price, which would allow me to buy more shares and therefore increase my share count.

HOWEVER, I know I would go crazy waiting for the drop in price and if MO continued to go higher into the mid-70s, I would be very upset. I might buy back at a higher price and end up with less shares. If MO did drop in price, how long would I have to wait to complete the trade? The time spent waiting for the drop would drive me nuts and I would be a TRADER, not an investor! I have done some of these trades very successfully with Enbridge Energy Management (NYSE:EEQ) and a portion of my MO shares in the past. However, the stakes are now higher due to the fact I have more shares and would be trading with larger amounts. I have lost money trading in my taxable accounts and I do not want to make the same mistake in my retirement accounts.

I am going to take a long range view of my MO position in my retirement accounts. I believe that MO will at least double in the next five years (from 10/30/16 to 10/30/2021). I see MO has returned about 231% the last five years according to the following link.


My goal was to have 100% of our retirement portfolio in Roth IRAs. I reached my goal on the first trading day of 2017 as I converted my entire remaining SEP IRA to my Roth IRA! I have been doing Roth IRA conversions since 2010. It took me seven years to complete my goal. Hopefully, this will be my last Roth conversion. Hopefully, I will not have to recharacterize at a later date. I have recharacterized in the past in order to reduce the tax impact. Currently, 100% of our retirement accounts are Roth IRAs and 100% of the portfolio owns MO.

I just made an estimated 2017 tax payment (well before the due date) and I am on my way to paying off the entire tax bill for my 2017 conversion. I hope to pay it off this quarter ASAP. I am willing to bite the bullet and pay the taxes now with the hope of not paying any taxes on the distributions as the years pass.

I will take MO dividends as distributions if needed to pay for our expenses. We did not need the MO dividends this past quarter so I reinvested it.

Why is it so important for me to have all my retirement funds in Roth IRAs? Why have I bitten a hard bullet and paid hundreds of thousands of dollars in taxes over the last seven years in order to convert my SEP IRA to a Roth IRA? Well, the answer for me is simple. I want to be able to take distributions tax free for the rest of my life. I want the choice to take dividends as tax free distributions for several years. At some point in time I would like to sell $1M+ worth of stock and take the $1M+ distribution tax free (a goal by age 67). I do not want to have to take any RMDs (required minimum distributions) later in life. There is a debate regarding Roth conversions, I have read both sides and decided that a Roth IRA fits my needs and goals. I recommend that my readers and followers read all they can on Roth conversions and decide for themselves if it fits their needs and goals.


1) Since 7/24/2014** when I initially made my dividend retirement portfolio public, my projected dividend income has decreased from $88,444 to its current projected dividend income of $49,115 a decrease of 44%. The reason for my substantial decrease in projected dividend income is because I sold all of my AGNC and PSEC positions. I now have a 100% allocation in MO. I have made many changes to this portfolio. However, the one constant is my MO position and its increased allocation.

The reason I sold AGNC and PSEC was because I did not like having to wonder if and when my dividend income was going to be cut. I like the predictability, stability and reliability of MO's dividend. Additionally, MO has significantly outperformed PSEC and AGNC over their respective inceptions. The bottom line was that as the years passed, it became apparent to me that I could rely on MO and not AGNC or PSEC for dividend growth and overall performance (total return over long periods of time).

2) MO is my retirement portfolio and I am willing to take the risk. It is a very stable and reliable stock, in my opinion.

3) The value of my retirement portfolio was $1,000,000 (scaled down) on 7/24/2014*, the date I made it public here at Seeking Alpha. The value at the close of trading on 1/11/2017 was $1,361,727. Additionally, I took several penalty-free distributions from my Roth IRA last year (2016 distributions) for a total amount of $112,975 (scaled down). Therefore, my initial portfolio value of $1M (scaled down) has increased by $361,727+ $112,975 for a total of $474,702 or 47.47% over a 30-month time frame (since I made my retirement portfolio public).

4) The S&P 500 closed at 1,984 on 7/22/2014. It closed at 2,275 on 1/11/2017. My retirement portfolio has outperformed the S&P 500 substantially since I made my portfolio public 27 months ago.

5) My main focus is on the DIVIDEND INCOME meeting our living expenses going forward.

6) Writing for Seeking Alpha has helped me immensely regarding my management of this portfolio. It keeps me accountable and honest.

7) If the price of MO increases 21% as the prices of EEQ or AGNC decrease 10%, I might sell 15% of MO and use the proceeds to buy EEQ or AGNC depending on the yields. This would, of course, increase the projected dividend income. I will continue to monitor and analyze what is the best strategy to meet our goals and needs.

Why Altria?

A) MO has exceptional profit margins. As the largest U.S. cigarette manufacturer, MO should lead this pricing strategy.

B) MO has increased its dividend 50 times in the last 47 years. It has an exceptional track record of dividend increases.

C) MO is recession-proof. MO is economically resistant to the outcome of a recession.

D) Altria is a significant shareholder in Anheuser-Busch InBev (NYSE:BUD). Its stake in Anheuser-Busch InBev is a big positive for their bottom line. It also makes MO a diversified tobacco company.

*** "From October 11, 2016, through October 21, 2016, Altria purchased approximately 12 million ordinary shares of AB InBev. Including these shares, Altria now has approximately 10.2% ownership of AB InBev.

Altria's increased investment in AB InBev supports its strategy of managing diverse income streams to deliver consistent financial performance over time. In addition, for ownership levels at or above 10%, Altria is entitled to foreign tax credits available in connection with the dividends Altria receives from AB InBev, as it was with its former SABMiller investment."

E) MO's high payout ratio is a very good tactic against lawsuits.

F) MO is a large cap company in an industry that is very stable.

G) MO is just getting started in the e-cigarette and vapor business. They currently have a smaller market share versus their competitors, however, based on MO's past history of excellence I believe they will eventually gain in that share of the market, thus increasing their bottom line.

H) *** "Altria's Statement on Philip Morris International's (PMI) MRTP Application Submission with the FDA

RICHMOND, Va. - (BUSINESS WIRE) - Dec. 6, 2016, - Altria Group, Inc. (Altria) notes that Philip Morris International Inc. today announced the submission of a Modified Risk Tobacco Product (MRTP) application for an electronically heated tobacco product with the U.S. Food and Drug Administration's (FDA) Center for Tobacco Products. FDA will now determine whether to accept the application for substantive review. Upon regulatory authorization by the FDA, Altria's companies have an exclusive license to sell this heated tobacco product in the United States."

I) Altria has expanded its $1 billion share repurchase program to $3 billion to be completed by the end of the second quarter of 2018.

** = 7/24/2014 is the date my retirement portfolio was published here at Seeking Alpha; 7/22/2014 is the date used for the closing prices of my retirement portfolio.

*** = From Altria's Website

Disclosure: I am/we are long MO.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This is my portfolio. I am not recommending anyone buy the stocks I own. Please do your own due diligence to decide which investments meet your individual goals and income needs. I take 100% responsibility for my decisions to buy or sell stocks and for managing my portfolio. I advocate all investors do the same with their investments and portfolio. " Each investor's BUY, SELL, or HOLD decision is based on one's risk tolerance, time horizon, and dividend income goals. My personal holdings may not fit each investor's current investing strategy."

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